Dow Closes Below 11,000

The Dow Jones Industrial Average closed below 11,000 for the first time in two years on Tuesday as doubts about the U.S. plan to rescue mortgage finance companies Freddie Mac and Fannie Mae hurt financial stocks and tumbling oil prices dragged down energy shares.

If you want to feel good buy a puppy and call your Grand Ma’ because there’s nothing but pain in this market, exclaims Jeff Macke.

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BANKS CAN'T FIND BOTTOM

The whole banking sector finished lower in an extremely volatile session, as investors feared the ongoing credit crisis could spur more bank failures after regulators took over IndyMac last week. Federal Reserve Chairman Ben Bernanke said the banking system is well capitalized, but under "considerable stress."

Freddie and Fannie shares plunged over 25 percent on fears that a government plan to stabilize the companies will dilute the value of their shares. U.S. Treasury Secretary Henry Paulson said the plan was designed to be a backstop.

I bought Goldman today, says Jeff Macke. I’ve been telling you for months that Goldman at $150 is my entry point. But if it breaks $145 I’m out.

Look at the ProShares UltraShort Financials ProShs , says Tim Seymour, it’s two times the inverse performance of the financials. I think traders are buying financials and then buying this as a hedge. It says to me their view of the overall sector is weak.

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BLAME THE SHORTS?

SEC chief Chris Cox made a statement that is puzzling traders. In verbal comments to the Senate, Mr. Cox said that he will institute an emergency order that will prohibit naked short selling in Fannie Mae and Freddie Mac although after hours the SEC said it won't be implemented until Monday.

Naked short selling is shorting a stock without actually borrowing it.

There are two reasons this statement is puzzling writes CNBC’s Bob Pisani in his blog Trader Talk. The rules are already in place regarding naked short selling; and there is no evidence that naked short selling is widely practiced regarding Fannie and Freddie.

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CRUDE PLUNGES

Oil dropped more than $6 on Tuesday, the largest drop in dollar terms in 17 years, as growing concern about the economic health of the United States stirred demand worries.

Oil didn’t fall off a cliff, exclaims Jeff Macke. All those traders who say the trend is broken – get over yourselves!

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AFTER HOURS ACTION: INTEL

Intel on Tuesday posted a higher quarterly profit as the world's biggest chipmaker was helped by strong sales of microprocessors used in notebook personal computers.

"As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe," Chief Executive Paul Otellini said in a statement.

Intel has been benefiting from brisk sales of notebook PCs, which are on track to outpace sales of desktop PCs this year. On Monday, Intel rolled out the latest generation of its Centrino wireless chip after a delay of several months.

If you want to talk about value, this stock looks attractive, says Guy Adami.

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GM UNVEILS HYBRID TURNAROUND PLAN

Just over a month after a major restructuring, General Motors has made some more drastic cuts as questions continue to swirl around it about its liquidity.

The automaker’s latest plan calls for $10 billion in cost cuts, suspending the common stock dividend and selling as much as $4 billion in assets in a bid to shore up cash.

I think the plan is ambitious and makes a lot of sense, says Tim Seymour. I like this stock as a trade for their market position in China, India and Russia.

Look down the line to Borg-Warner , adds Guy Adami. I think they should benefit from GM's restructuring.

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SPRINT SAYS HELLO TO SOUTH KOREA

SK Telecom the largest provider of wireless phone service in South Korea, is in talks to acquire Sprint Nextel , the troubled U.S. wireless carrier, according to people familiar with the talks.

SK Telecom, which is smaller than Sprint would be joined in any deal by private equity firms that would contribute cash towards the purchase, sources told CNBC.

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YOU THOUGHT IT WAS BAD HERE?

All around the globe people are feeling your pain. International markets including Great Britain and France are being dragged down the struggling U.S. economy.

I think the interest rate sensitive markets such as Turkey, South Africa and Argentina will continue to suffer, says Tim Seymour. But longer term I like the story. And the FXI looks interesting to me.

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NOT OVER 'TIL THE FAT LADY SINGS

The VIX , which is the CBOE’s volatility index spiked above a critical level today. In the past, the Fast Money traders have said the market would not bottom until the VIX recorded a 3-handle, which it did Tuesday.

OptionMonster Jon Najarian says although we may be near capitulation we’re not there yet. He thinks the bottom will be in this market when we see at least two of the following three things.

Until we see a solid push lower in oil, these sell-offs mean nothing he says.

And this wouldn’t be Fast Money without trades. When we hit the bottom, Jon Najarian suggests getting long Ultra-Long Financials ETF , General Motors and Tesoro .

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OTHER TRADES

Word on the Street

The Fast Money guys take a look at today's top business stories.

The only way to trade this market is defensively, says Joe Terranova. Find a spot with a good fundamental theme. I bought RIMM today at $102.

I try and flag plays for you whenever I can, reminds Guy Adami. Evergreen Solar is up and I told you to get in around $9. Now it’s time to take profits. Celegenelooks like an $80 stock. And J&J is worth a look.

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